The Central Bank of Tunisia (BCT) explained the raising of its key interest rate by “past and recent wage increases that are likely to maintain a price-wage spiral.”This spiral is very detrimental to the economy and accentuates macro-economic imbalances because of the impact on the consumption of imported products, the BCT said, according to the Tunisian News Agency TAP. The central bank decided, on February 19, to raise its key interest rate by 100 basis points for the third time in a row, bringing it from 6.75% to 7.75%. Following the decision to raise key interest rate, BCT Governor, Marouane El Abassi, on Wednesday predicted a fall in the inflation rate to less than 7% at the end of 2019, or between 6.8 and 6.9%. Yet, TAP quoted experts as saying that the increase in the key interest rate of 100 points adds to the burden of companies, blocks investment and growth and depletes the already-deteriorated purchasing power of citizens. For the issuing institute, in 2019 and 2020, inflation would slightly relax from its current level, but would remain at a high level.

Source: The North Africa Journal February 21, 2019 14:03 UTC